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Tax Reform Provisions for Private K-12 Education: Unintended Consequences?

by John Gordon

While the final language is not yet out, members of the conference committee on federal tax legislation have reportedly reached an agreement on the outlines of a compromise bill. Going into the conference committee, one area of agreement in the House and Senate proposals was a measure that takes direct aim at public education: subsidizing private school tuition for wealthy families.

Both the House and Senate bills included provisions that would expand the 529 college saving account plan, which allows parents to save money and withdraw that money for higher education expenses (tax-free) to also cover up to $10,000 of tuition at private and parochial schools. (Language in the Senate bill also covers home schooling expenses.) The provision is a federal subsidy for private and parochial school tuition.

As it currently stands, 529 plans are used by largely upper-income households (median income of $142,400) and by making the proposed changes, it will only increase the growing inequality in educational attainment between high-income families and low and middle-income families. The planned expansion of this tax break is welcomed by school choice advocates, who argue that public schools are unable to properly educate students and should be more market-oriented. However, this planned expansion would be largely unavailable to low and middle-income families.

In reality, this plan does not really expand school choice options to anyone. It actually undercuts the savings benefits of the plan if they are used for private and parochial K-12 tuition. Pulling out the money sooner both lessens the tax benefit of the plan and leaves less money available in the plan for college. If you are a wealthy family, this is not much of a problem. But if you are a middle class or low-income family, it would be very unwise to use this money before college. The only real beneficiaries of this expansion would be people who are high-income and wish to have the government subsidize their kids private school tuition.

Withdrawing funds from the savings plans sooner rather than later could also have implications on the investment strategies employed by states and fund managers. Such changes could impact the eventual rates of return for all participants in 529 programs.

Along with capping the deduction for local property taxes and/or state and local income and sales taxes at $10,000, the 529 measures could set back public funding for education. Combined with the trillion dollar plus increase to the federal deficit the tax bill could bring, it’s another demonstration of why our members of Congress need to vote down this bill.

Voices for Illinois Children Newsletter – December 6, 2017

We’ve moved!

Voices for Illinois Children has moved its offices down the street. Our new mailing address is WeWork c/o Voices for Illinois Children, 125 S. Clark Street, Chicago, IL, 60603. Our phone numbers and email addresses remain the same.

2017 Illinois Kids Count Report

Our 2017 report focuses on the education of our children. The data in this report tells a strong story about achievement and opportunity gaps. It also illustrates how we got here: by adults making choices to give some children less of what they need to be successful students. More often than not, we give low-income and minority students in Illinois less effective teachers, less experienced principals, a less rigorous curriculum, and fewer resources.

 

Damage to Women and Families Persists in Wake of Budget Impasse

Chicago Foundation for Women, Voices for Illinois Children, and Loyola University Chicago’s Center for Urban Research and Learning today released a new report on the impact of Illinois’ budget impasse on women and children. The report, titled “Damage Done: The Impact of the Illinois Budget Stalemate on Women and Children,” was prepared by Voices for Illinois Children and Loyola’s Center for Urban Research and Learning. Illinois’ most vulnerable residents, including low-income women of color and their children, continue to bear the burden of the state’s two-year impasse, which delayed payment of contracts to social service providers and resulted in significant cuts in staff and services that cannot be quickly replaced.

Download (PDF, 1.05MB)

2017 Kids Count Report: Illinois Investments Matter

Written by Anna Rowan

Data from the beginning of the state’s budget crisis show that smart investments in children lead to progress. Illinois is currently 19th in the nation in the latest rankings for child well-being, according to the 2017 KIDS COUNT Data Book from the Annie E. Casey Foundation. Yet, the lack of a full state budget for the past two years (and no foreseeable end to the impasse) puts Illinois in danger of undermining its own investments and progress.

2017 KIDS COUNT

Source: Annie E. Casey Foundation

The 2017 KIDS COUNT Data Book uses 16 indicators to rank each state across four domains — health, education, economic well-being, and family and community — that represent what children need most to thrive. Illinois ranks:

  • 10th in health. Illinois has been a national leader in providing children with access to health insurance. From 2010 to 2015, Illinois cut the uninsured rates for African-American and Latino children in half, from 6 percent to 3 percent, for both groups.
  • 13th in education. Early childhood education has been a bright spot for Illinois. Less than half of 3- and 4-year olds do not attend school, ranking the state fifth in this indicator. However, the state still has significant work to do to close the achievement and attainment gaps that exist between low-income and minority students from their white and more affluent peers.
  • 25th in economic well-being. Illinois families continue to struggle with economic security. Although more kids’ parents are now working full-time, year-round jobs than in 2010, the percentage of children living in poverty has not changed when comparing the height of the Great Recession in 2010 to 2015 data.
  • 28th in the family and community domain. Illinois has made great strides in reducing the teen birth rate. There were more than 6,000 fewer teen births in 2015 than in 2010. But there are still far too many children living in high-poverty areas and in single-parent families.

The data show that key investments in health and early education have reduced racial disparities among children. Although Latino children still lag behind in preschool attendance, there is little difference between the percentage of African-American and white children who aren’t attending preschool. Additionally, all groups of kids are accessing health insurance at roughly the same rate. However, there is still work to do to lessen other disparities. For example, more than two-thirds of the half a million Illinois children living in poverty are children of color. If Illinois elected officials fail to enact a budget for a third year, we run the very real risk of causing disparities to grow and wiping out the progress we’ve made.

The 2017 KIDS COUNT Data Book with state-by-state rankings and supplemental data can be viewed at http://www.aecf.org/resources/2017-kids-count-data-book/.

 

Higher Education Funding Cuts, Reduced Enrollment

The on-going impasse in Springfield continues to put a severe strain on the public university system in Illinois. As the legislature and governor fail to approve a complete budget for the fiscal year, it puts universities in the unenviable situation of having to raise tuition and fees while also looking at ways to cut costs. Some recent examples:

  • Southern Illinois University has reduced staff by almost 10% between the academic years starting in 2014 and 2016. It has reduced its authorizing budget by $21 million since the beginning of the budget impasse. Just last week, Southern Illinois University trustees approved a loan of up to $35 million from Southern Illinois University-Edwardsville to support its Carbondale campus.
  • Since 2016, Eastern Illinois University has reduced its workforce by more than 500 people (from 1,743 employees to 1,224 employees).
  • Chicago State University eliminated more than 400 staff positions in 2016.
  • Governors State University this year approved eliminating 22 degree programs and raises tuition by 15%.
  • Northern Illinois University has announced a reduction of 150 staff positons for Fiscal Year 2018.
  • As a cost-cutting measure, Northeastern Illinois University shut down the campus for three days last month. It has also required employees to take furlough days during the last two academic years.


State University Budget Cuts

university funding May
MAP funding

 

Student Enrollment
As the funding issues continue, it appears to be having an impact on the enrollment of full-time students.

university enrollment

 

In fact, Chicago State University enrolled just 86 freshman this fall.

This decline coincides with a trend that has been occurring throughout the decade. Illinois is among the nation’s leaders in outmigration of graduating high school students, with an estimated net loss of over 16,000 students. This is not a recent development; Illinois high school students have been leaving the state for college in increasing numbers.

Illinois out-of-state students

Source:  Illinois Board of Higher Education

Illinois high school and college students deserve a world class higher education system that allows them to compete in the world economy. As it currently stands, Illinois is underfunding its universities with subsequent staff and program cuts.

This graduate season it is worth contemplating the higher education system we want for our state.  More survey data might be needed for a more accurate picture to explain enrollment declines.  However, it seems the state’s high school and college students see what the future might hold for Illinois’ higher education system and are leaving.

Written by John Gordon

Illinois Falling Short in Reducing Income Inequality

As another year’s tax season comes to a close, Illinois data continues to show that we must work harder to enact policies that reduce income inequality in our state.

 In Illinois, income inequality is high and has worsened over time.

Wage stagnation and tax policy are contributing to the increase in income inequality.

Nationwide over the last four decades, wages have grown for top earners, but not much at all for those at the bottom and in the middle.[3] Furthermore, in Illinois, top earners pay a lower share of taxes.

According to ITEP’s Tax Inequality Index, Illinois has the 5th most unfair state and local tax system in the country. This places an increased burden on the already strained budgets of low-income families. In 2015 in Illinois, families in the lowest income group paid the most state and local taxes as a share of their income (13.2%), roughly double the share that the highest income groups pay.[4]

Total state and local taxes paid as a share of income, 2015

ITEP Tax Graphic

 Source: Institute on Taxation and Economic Policy

Illinois needs new revenue to resolve the current budget stalemate and continue to provide important services to its residents. In looking at the state’s tax system, elected officials should consider the existing income inequality among its residents. Two ways Illinois can reduce the tax burden on working families are by increasing the state’s Earned Income Tax Credit (EITC) and establishing a state child tax credit.  These two measures will help put Illinois on the road towards a fairer tax system and improve the lives of thousands of Illinois residents.

Written by Anna Rowan


[1]Via the Center on Budget and Policy Priorities: EPI analysis of IRS data. Estelle Sommeiller, Mark Price, and Ellis Wazeter, “Income Inequality in the U.S. by state, metropolitan area, and county,” Economic Policy Institute, June 16, 2016

[2]KIDS COUNT Data Center

[3]How State Tax Policies Can Stop Increasing Inequality and Start Reducing It,” Center on Budget and Policy Priorities

[4]Who Pays?” A Distributional Analysis of the Tax Systems in All 50 States, 5th Edition,” Institute on Taxation and Economic Policy

Agenda to Build Better Lives

voices_agenda_nov2016-cover

Read Voices for Illinois Children’s Agenda for Building Better Lives that outlines steps we believe the state must take on behalf of Illinois children and families.

In shaping our Agenda, Voices connected with both communities and partner organizations to ensure that we are operating in the most effective advocacy space for children and families.

Message from Voices’ President

January 20, 2017

tasha-green-cruzat-head-shot-largeIt is an uncertain time for Illinois and the nation. The new administration in Washington is certain to make decisions at the federal level that will reverberate in Illinois. As the Illinois Legislature makes tentative moves toward a resolution to the 19-month budget impasse, localities and non-profit organizations are still in dire need of resources to provide services and help residents meet their basic needs.

Voices has a role to play in addressing these challenges and offering solutions to some of today’s most intractable issues. This year as Voices celebrates our 30th Anniversary, we will be bold, courageous, and unshakable in our commitment to children, their families, and communities.

Informed by our Agenda to Build Better Lives, Voices will:

  • Demand the passage of a complete State budget that invests adequate and expanded public resources towards programs that support children and families.
  • Champion amending the state constitution to make Illinois’ tax system fairer.
  • Propose a model for Racial Equity Assessments at the state-level that considers the equity impacts of policy proposal and funding decisions and call for the model’s enactment.
  • Push for juvenile justice reforms that put less money in costly prisons and more resources into community-based alternatives that strengthen the communities where youth live.
  • Give all children a promising start in school by building the early math skills in kids birth to age 8.
  • Give you the data and tools to advocate for programs, policies, and investments that support all youth in Illinois, regardless of race, gender, household income, or zip code.

My first year at Voices have been a gratifying experience. I look forward to keeping you updated on Voices’ progress and invite you to join us in our efforts to give every Illinois child the opportunity for a brighter future.

Sincerely,

Tasha Green Cruzat

President, Voices for Illinois Children